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Compensation - Human Resources Management

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Tyrus Woods Human Resources Management Chapter 10 - Compensation Many surveys have shown that employees rank pay low in importance. For example, a large-scale survey found that only 2 percent of Americans declared that pay is a very important aspect of a job. Compensation is a very complicated topic with several aspects, requiring various decisions for companies to make. Chapter 10 focuses directly on the vast array of subject areas related to Compensation. First, Compensation is said to have three components, base compensation, the fixed pay an employee receives regularity by salary (weekly, monthly). Pay incentives is another compensation type designed to reward employees for good performance. Pay incentives may include bonuses and profit sharing. Finally, benefits make up the last of an employees total compensation. ...read more.


However, variable pay is often more rewarding for those higher salaried employees. For employees earning more than $750,000 in base pay receives 90 percent variable compensation while and employee earning $25,000 per year in base pay only receives 5% variable pay. Companies must determine where pay decisions will be made. Often Human Resources (HR) is the centralized source for payment/compensation decisions. In contrast, a decentralized system, pay decisions are delegated into the firm, commonly to unit managers. While there are pros and cons to centralization and decentralization of pay decisions, in most cases, it may be more appropriate to centralize pay decisions. This becomes especially important if the organization faces frequent legal challenges. Too much centralization however does not handle equity concerns very efficiently. ...read more.


However, there is much debate as to whether the minimum wage is enough to secure a decent standard of living. Santa Cruz, California requires a minimum hourly wage of $12.55 as posted in the Emerging Trends Magazine. The Equal Pay Act (EPA) was passed in 1963 as an amendment to the FLSA. The EPA requires men and women to be paid the same amount of money if they hold like positions and are basically equal in terms of skill, effort and responsibility. There are exceptions however which include more seniority, better job performance, greater quantity or quality of production and nigh shift differential. Compensation is a very complicated topic of discussion and a critical aspect of the success of any company. While many companies are out-sourcing to decrease the amount of expenses compensation will continue to be a major focus. Careful planning and skill must be utilized to design and implement an adequate compensation system. ...read more.

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